Correlation Between Lian Hwa and Giant Manufacturing
Can any of the company-specific risk be diversified away by investing in both Lian Hwa and Giant Manufacturing at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lian Hwa and Giant Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lian Hwa Foods and Giant Manufacturing Co, you can compare the effects of market volatilities on Lian Hwa and Giant Manufacturing and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lian Hwa with a short position of Giant Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lian Hwa and Giant Manufacturing.
Diversification Opportunities for Lian Hwa and Giant Manufacturing
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lian and Giant is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lian Hwa Foods and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing and Lian Hwa is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lian Hwa Foods are associated (or correlated) with Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Lian Hwa i.e., Lian Hwa and Giant Manufacturing go up and down completely randomly.
Pair Corralation between Lian Hwa and Giant Manufacturing
Assuming the 90 days trading horizon Lian Hwa Foods is expected to generate 0.69 times more return on investment than Giant Manufacturing. However, Lian Hwa Foods is 1.45 times less risky than Giant Manufacturing. It trades about 0.11 of its potential returns per unit of risk. Giant Manufacturing Co is currently generating about -0.48 per unit of risk. If you would invest 11,200 in Lian Hwa Foods on August 25, 2024 and sell it today you would earn a total of 350.00 from holding Lian Hwa Foods or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lian Hwa Foods vs. Giant Manufacturing Co
Performance |
| Timeline |
| Lian Hwa Foods |
| Giant Manufacturing |
Lian Hwa and Giant Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lian Hwa and Giant Manufacturing
The main advantage of trading using opposite Lian Hwa and Giant Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lian Hwa position performs unexpectedly, Giant Manufacturing can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Giant Manufacturing will offset losses from the drop in Giant Manufacturing's long position.| Lian Hwa vs. Uni President Enterprises Corp | Lian Hwa vs. Taiwan Cement Corp | Lian Hwa vs. Ruentex Development Co | Lian Hwa vs. Symtek Automation Asia |
| Giant Manufacturing vs. Merida Industry Co | Giant Manufacturing vs. President Chain Store | Giant Manufacturing vs. Cheng Shin Rubber | Giant Manufacturing vs. Uni President Enterprises Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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